Earnings Call Transcript
Ryman Hospitality Properties, Inc. (RHP)
Earnings Call Transcript - RHP Q3 2021
Operator, Operator
Welcome to Ryman Hospitality Properties Third Quarter 2021 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; and Mr. Mark Fioravanti, President and Chief Financial Officer; Mr. Patrick Chaffin Chief Operating Officer; and Scott Bailey, President Opry Entertainment Group. This call will be available for digital replay. The number is 800-938-2113 with no conference ID required. At this time, all participants have been placed on listen-only mode. It is now my pleasure to turn the floor over to Mr. Mark Fioravanti. Sir you may begin.
Mark Fioravanti, CFO
Good morning and thank you for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance. Any statements we make today that are not statements of historical fact may be deemed to be forward-looking statements. Words such as believes or expects are intended to identify these statements, which may be affected by many factors including those listed in the company's SEC filings and in today's release. The company's actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements whether as a result of new information, future events or any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure in exhibit to today's release. I'll now turn the call over to Colin.
Colin Reed, CEO
Thank you, Mark, and good morning everyone. When we last spoke on August 3rd, we were on the front slope of a rising wave of COVID-19 Delta variant cases and bombarded by headlines about the potential return of the restrictive measures we saw last year. Today, three months later, we are past the peak of that wave and now clearly on a downward slope. As of the end of last week, the national seven-day average of new COVID-19 cases had fallen over 59% from its peak on September 13th and about 19% in the last two weeks. Hospitalizations have followed the same trend. I am happy to report that despite the impact of the Delta variant in the third quarter, it’s remarkable that our business performed in the upper end of our expectations, which we originally said and communicated before the Delta wave began. On a consolidated basis, we generated over $18 million of positive cash flow per month in the third quarter, which we define as Adjusted EBITDA less cash interest and debt service. This is compared to our expected range again determined pre-Delta of $16 million to $19 million of positive cash flow per month. This is an impressive performance and I want to quantify the impact of the Delta variant on our business during the third quarter because from the headlines we all read and from the media in general in August and September, you sometimes got the impression that the sky was falling and we would be returning to government-mandated lockdowns and gathering restrictions. In the third quarter, we saw about 160,000 group room nights lost related to concerns over this Delta variant. However, let me give you some important context around this figure. First, 160,000 room nights is about 5% of the total cancellations we have experienced since the start of the pandemic. So in scale, the impact of the Delta wave was and is nothing like what we went through last year or earlier this year. In addition, 93% of these third quarter cancellations were for travel dates this year or roughly 40% for the third quarter and 53% for the fourth quarter with only a handful spilling into 2022. This means the cancellation window we experienced in the third quarter was about 50 days on average, compared to the roughly 90-day window for cancellations during the first phase of this pandemic. What this demonstrates to us and what we are hearing from the meeting planners themselves is that there continues to be a strong need and desire to hold their meetings. Many of these gatherings are mission-critical to their organizations and they are waiting until the last possible moment as they watch the data before making any cancellation decisions. As a result, as the Delta variant wave subsides, the cancellation window has been shrinking, which is good news for us as we look towards next year. As of the end of the third quarter, we had 44 points of net group occupancy on the books for 2022 compared to 47 points at the end of the third quarter of 2018 for 2019, our last pre-COVID year. These group room nights for next year also contracted at a 6.5% higher rate than our T1 rooms at the same time in 2018. Therefore, in total, we have more group rooms revenue on the books for next year than we had at the same point in time headed into 2019, which turned out to be a record year for our business. Of course, it’s important to highlight that even with these recent cancellations, we still traveled over 300,000 group room nights in the third quarter, more than double the group room nights that traveled with us in the first half of the year before the Delta wave. For the quarter, our hotel portfolio reached 54.5% occupancy with a peak of 63.4% in the month of July, just before the Delta variant upheld. In fact, for the peak month of July, excluding the just reopened Gaylord National, which we opened on the 1st of July, the other four Gaylord Hotels reached 69% occupancy for that month. Now think about that for a moment. We reached nearly 70% occupancy in hotels of our size including the additional inventory of 300 new rooms at the Gaylord Palms. Again, this is a clear signal of the pent-up demand among both group and leisure travelers for what our hotels have to offer. I would add that we’ve already seen cancellations materially decline in recent weeks after it became more apparent that the Delta wave had subsided in mid-September, which brings us to another very important dynamic to note in our group business, which is that we collected over $10 million in cancellation and attrition fees for the third quarter. For context, through the end of the third quarter, we have collected $28 million in cancellation and attrition fees year-to-date, which is the same level of fees we collected in 2009 during the great financial crisis. As you know, the contractual nature of our business provides a level of downside protection, which we have highlighted with you often over the years and sets us apart from the rest of our hospitality peers that are not as group-focused. With all our hotels now open and operating and plenty of group meetings successfully and given there were no further governmental restrictions on gathering sizes in our markets, the collectability of our contracted fees for groups who do choose to cancel has become much stronger. Now switching over from group for a moment, the other area of momentum in our hospitality business which was even less affected by Delta is the powerful resurgence we've seen in our leisure demand. We sold over 215,000 transient room nights in the third quarter, which is over 11% more than in the third quarter of 2019 before COVID. Our transient ADR in the quarter exceeded $250, which is almost 24% higher than the third quarter of 2019. This transient momentum has continued into the fourth quarter, which is very exciting for us as we head into our most leisure-heavy months of the year over the holiday season. We recently began publicizing our 2021 Christmas program for the Gaylord Hotels, which this year will be a completely new multi-century experience built around the Warner Bros. Health franchise with several highly unique interactive challenges for families to complete. This program is generating great response, driving material leisure transient pickup compared to last year. The bottom line is that while the Delta wave took a bite out of our group business in the third quarter, which will also linger into the fourth, it did not stop the broader reawakening that we have been witnessing in our hotels since the beginning of this year when the vaccine rollout commenced. And when it comes to our entertainment business, the effect of Delta was barely noticeable. Indeed, our entertainment business was just a few percentage points from matching the levels of 2019’s third quarter on a same-store basis. That is excluding the contributions of both Ole Red Orlando and our Circle Media joint venture neither of which we had in the third quarter of 2019. Revenue and adjusted EBITDA in the third quarter were 92% and 95%, respectively, of 2019’s third quarter. Live entertainment demand has clearly been reanimated post-pandemic. That is also why we're excited to have reached a new agreement with Stratus Properties announced last week to acquire Block 21, the one-of-a-kind mixed-use entertainment complex in the heart of downtown Austin. Block 21 is anchored by the iconic 2,750 seat ACL live at the Moody Theater, accompanied by the 3TEN at ACL Live Club, the 251 room W Austin hotel and over 50,000 square feet of Premier Class A commercial space. We could spend quite a bit of time discussing the menu of exciting opportunities created by this marriage of Nashville, the Music City, with Austin, the live music capital of the world. Those of you who have followed our company since before COVID-19 know the history of this transaction, which we had originally announced in December of 2019 but were forced to cancel in the depths of the pandemic. We stayed in close contact with Stratus throughout the past year and a half, and we were delighted to bring this deal back to fruition. And as we said, the first time we announced this acquisition, opportunities to own assets like this in a fantastic growth market like Austin do not come around very often. The acquisition of Block 21 will be a transformational deal for the entertainment segment, providing not only a tremendous increase in scale and geographic diversification, but also a host of opportunities to leverage our existing capabilities, including our artists and audience relationships, to create value across our physical and digital platforms. For example, we see opportunities to further utilize the ACL live venue across all dayparts, to cross-market our customer bases, and cross-promote content and artists between ACL live and our other venues and channels to improve the W Austin hotel utilization, especially in our wheelhouse of group business. And finally, to enhance margins through shared services. To be clear, we expect to be accretive. We expect this deal to be accretive to AFFO in its first full year. Therefore, as Delta fades into the fourth quarter, our focus is squarely on returning to growth. This includes the investments that we are making in Block 21 to supercharge our live entertainment strategy, and a significant amount of capital that we have deployed into our hospitality business in the last three years that we look forward to maturing in the years to come. These include the Texan and palms expansions, soundwaves at Opryland, the national renovation, and our full ownership stake in the Gaylord Rockies, and we take a full plate of further future investment opportunities under consideration across our businesses from scouting new locations for Ole Red to develop opportunities for the recently acquired land around the Gaylord Rockies to further enhancements, renovations, and expansions across our hotel portfolio to continue to serve our group and leisure customers and their evolving needs as this long-awaited recovery continues to take hold. Now before I hand it over to Mark, who will review our balance sheet and the detailed financial details of the Block 21 transaction. Let me just make one last comment. I've been in this business for a long time, and I've witnessed my share of crises over that span, COVID-19 merely being the last. However, as I sit here today, I cannot overemphasize how excited I am about everything happening in our portfolio and the opportunity set in front of us. Our teams inside and out of our hotels and entertainment venues have done a tremendous job taking care of our customers and our assets through this extraordinary period of time. I believe we, as a company, have emerged better for it given everything we've learned. So with that, let me hand it over to Mark.
Mark Fioravanti, CFO
Thank you, Colin, and good morning, everyone. In the third quarter, the company generated total revenue of $306.9 million and a net loss to common shareholders of $8.5 million, or $0.16 per fully diluted share. On a non-GAAP basis, the company's third quarter consolidated Adjusted EBITDA was positive $86 million and AFFO available to common shareholders was $52.1 million, or $0.94 per diluted share. This marks the second quarter of positive consolidated Adjusted EBITDA since the first quarter of 2020 for the COVID-19 pandemic. As Colin noted, we delivered in the upper end of our previously expected range for monthly cash flow, generating an average of over $18 million per month in the quarter. These results are a marked improvement in our business over the third quarter of last year, when we had substantial monthly cash burn during the height of the pandemic and illustrate how far our businesses have recovered in the last 12 months. While cancellation rates in the last few weeks related to Delta have materially improved, as Colin noted, approximately one-half of those group cancellations occurred for travel dates in the fourth quarter. These cancellations will have a lingering impact on this current fourth quarter. We expect that fourth quarter average monthly cash flow after debt service will be in the mid-teens, as those cancellations flow through the balance of this year. In terms of liquidity, due to our positive cash flow, we retired $45 million of our revolver in the third quarter and netted with an outstanding balance of $180 million. This left $520 million available and combined with the $53.2 million of unrestricted cash gives us approximately $573 million of available liquidity. As we announced last week, the purchase price for the acquisition of Block 21 will be $260 million, of which we will assume approximately $138 million of the property's existing non-recourse CMBS debt. We plan to finance the balance of approximately $122 million using our available liquidity. We expect the transaction to be accretive to AFFO on a full-year basis and the combined purchase price net of a projected $11 million of cash reserves acquired represents approximately 15 times the last 2019 pre-COVID adjusted EBITDA of Block 21 and approximately 12 times our anticipated 2023 adjusted EBITDA contribution. This acquisition is fully permitted under our existing credit facility covenant waiver, and we expect to be able to exit that waiver on schedule early next year. The company once again did not tap our existing ATM program in the third quarter, but it remains in place and available to us, as we look at our recent and upcoming capital investment activity. This includes Block 21, and the many exciting opportunities we see for the newly combined entertainment portfolio after this transaction, as well as the next generation of expansion, enhancements, or improvements across our hotel portfolio.
Colin Reed, CEO
Thanks Mark. No, I'll hold my remarks. Let's Emma go and do some Q&A, and then maybe we'll have a closing remark at the end.
Operator, Operator
And we will take our first question from Bill Crow with Raymond James.
Bill Crow, Analyst
Hey, good morning guys. Mark, just following up where you left off on Block 21 and the financing on a long-term basis. Is that accretive in the first full year if you maintain your capital structure, in other words kind of a 50-50 debt-equity assumption?
Mark Fioravanti, CFO
Yes, marginally.
Bill Crow, Analyst
Okay. I also wanted to clarify the situation regarding cancellation fees. Could you provide insights on what those fees look like for the fourth quarter, and based on current cancellations, what can we expect for fee collections next year?
Patrick Chaffin, COO
Hey, Bill, this is Patrick Chaffin. As we look to the fourth quarter, I think this was already mentioned, we're expecting in the mid-teens not quite as high as what we saw in the fourth quarter of 2020, but pretty close. As we collected roughly $9 million or $10 million in the third quarter, we expect mid-teens for the fourth quarter, and based on how everything is going so far that we are standing by that forecast. As we look to next year, we do expect those cancellation fees to start declining rapidly as we're seeing fewer inferior cancellations. I mean, at the peak of Delta, we were seeing 3,000 to 5,000 cancellations per day in room nights. That’s now dropped to below our pre-pandemic level of about 600 per day. So we're definitely getting back to a much more normalized state of cancellations. Therefore, we expect to see cancellation fees decline in 2022.
Bill Crow, Analyst
All right. I may jump back in.
Colin Reed, CEO
Hey Bill. Let me just add one thing to Mark's comment about accretion, the first year of operation. It's going to take us a good 12 to 18 months to put things like tours into the Moody Theater. It's going to take us some time to get the renovations of this hotel done, which I mean, we're very excited about it. I mean you think about that W hotel we purchased that maybe $250, a key or something like that, not $2.2 million a key. This thing will crank up I think in that 12 to 24 month period. But we're very excited about this deal.
Patrick Chaffin, COO
Thanks Bill.
Operator, Operator
We'll go next to Shaun Kelley with Bank of America.
Shaun Kelley, Analyst
Good morning, everyone. Colin, you quickly mentioned a couple of things at the start, and I want to ensure I captured everything. You provided the updated performance metrics for 2022, and if I understood correctly, the occupancy on the books was 42%. That seems modest, so could you confirm if that was the correct figure?
Colin Reed, CEO
No. No, the number I didn’t rattle. I stated we have 44 points of net occupancy on the books, which compares to 47 at the end of the third quarter of 2018 to 2019, but the rate is materially higher. So net-net we've got more group revenue on the books for next year than we did in 2018 to 2019. The group part of this is very important. By the way, we saw really good group bookings in the month of October and lead volumes. We'll have all of the lead volume data here, Patrick, in the next 24 hours. But we booked a bunch of rooms in the month of October. The key to focus on, in my mind, is can we keep the level of leisure business that we have seen in the middle of this pandemic next year? Our product is fabulous. The assets that we own are really great for the leisure customer. We booked in the third quarter 11% more leisure rooms at a rate that is about 20% up on last year. When we talk about our group business revenue-wise being above where we were in 2018 to 2019, I am hopeful that our leisure production is going to be materially better in 2022 than we saw in 2019. So, I’ve sort of branched out from your question, so that's how we sort of see the world next year.
Shaun Kelley, Analyst
Thanks for clarifying and I apologize for the noise. Regarding the 44 compared to the last update of 43, if I understood the data correctly, it seems you did notice some improvements for 2022. Can you help us understand if you expect to achieve those last few points? Are you holding them back as we approach the fourth quarter due to the favorable rates you're experiencing? What are your thoughts on the booking psychology as we look to fill in the remaining gaps for 2022?
Colin Reed, CEO
Yes. I'll give you my answer and then I'm going to throw it over to Pat to amplify. What we have told our sales folks is that we want to put occupancy on the books for next year. Rate is obviously important, but we want to bring our people back to work and we want to put occupancy on the books. I haven't got the detail of the 160,000 room nights that we booked in October, Patrick, in terms of T+1. We'll have that data here shortly.
Patrick Chaffin, COO
I do.
Colin Reed, CEO
All right. We'll put it on.
Patrick Chaffin, COO
Yeah. So just talking about what we booked in October, we booked about 163,000 room nights, about 51,000 of that was going into T plus 1 or 2022.
Colin Reed, CEO
That's a good number.
Patrick Chaffin, COO
In October, our average for T plus 1 was around 33,000 to 35,000 room nights. The highest point we reached was in 2019 with about 60,000 to 63,000 room nights. While we haven’t matched that peak, we are above the average at 51,000. Delta had an impact on 2022 by slowing things down; it didn’t stop people from looking, but it did affect decision-making. Q4 is crucial for us, and we anticipate some lingering effects from Delta as we operate with a 90-day cancellation window, meaning it takes time to regain lead volumes. However, the encouraging results we saw in October give us hope for this quarter. We expect to see similar patterns from the second quarter in 2022, with pent-up demand starting to emerge and the end of the year for the year business reflecting increased bookings.
Mark Fioravanti, CFO
And keep in mind, you're comparing occupancy rates with 300 more rooms homemade as well.
Colin Reed, CEO
Right.
Mark Fioravanti, CFO
So, we're selling more rooms.
Colin Reed, CEO
Yeah. That's a good point. But net-net, we're pretty encouraged with what has gone on with this glide slope of Delta and witnessing the behavior of the meeting planners. When Patrick gave me these numbers for October yesterday, this surprised me a little bit on the upside. The number he just got this morning for the T plus 1, that 50,000-plus room nights, that's really encouraging. So I'm pretty optimistic absent another wave of whatever. I think 2022 hotel-wise is going to be – could be pretty good for us.
Shaun Kelley, Analyst
Great. As my final question, could you discuss the group spending behavior? Given that occupancy significantly increased in July and August, how are guests behaving on-site compared to pre-COVID levels in terms of food and beverage consumption and other amenities? What is the psychology of the groups once they are actually on-site?
Colin Reed, CEO
Do you want to take it?
Patrick Chaffin, COO
Yeah. Shaun, I would sum it up as the psychology is we want to get back to business. We want to get back to meeting. So, when they're on-site, we are seeing folks opening up the pocketbook. Obviously, they're trimming their budgets just to match up to the occupancy of the group that's in-house. So maybe they have fewer attendees simply because of Delta or something else. But on a per-person basis, we're very encouraged by what we've seen. Corporate has been getting back to 2019 levels in many cases. Folks are definitely ready to get moving. We've talked about this before. People know that they need to be meeting again. Once they get together, they're excited to be together again and that's showing up in the food and beverage revenues that they're capturing.
Shaun Kelley, Analyst
Thank you very much.
Colin Reed, CEO
Thanks Shaun.
Operator, Operator
We'll go next to Smedes Rose of Citigroup.
Smedes Rose, Analyst
Thanks. I wanted to ask you a little bit more about next year as well. You talked about the significant rate improvement for the groups that are on the books now for 2022. But could you talk a little bit more about what you're seeing on the expense side? For the quarter, for what it's worth your margin was better than what we had expected. But I'm just wondering what you're seeing on kind of labor costs and food and beverage costs and how much of those rate increases will kind of flow through to margin improvement next year?
Colin Reed, CEO
Yeah. Why don't I let Patrick handle this rather than me starting and then handing over. You go for it.
Patrick Chaffin, COO
Smedes, you're very correct. Labor is the biggest challenge. We've seen increases in the third quarter versus 2019 of about 20% in terms of labor wage increases. Now we're working very hard to offset that. We have talked about this for several months that we are targeting significant decreases in our management headcounts, simply because we've learned so much through COVID and believe we can operate with fewer folks, highly talented, highly compensated, but fewer bodies in place. We've targeted around the mid-teens in terms of reductions in headcount in the management ranks to help offset the hourly increases in wages. Pricing in our rooms is obviously helping. Food and beverage can be priced in more real-time. Meeting planners understand that food and beverage are going to go up as the cost of meat and proteins go up. We're doing other things, too, to help offset that by bringing some of our meat preparation, protein preparation in-house and doing some of the butcherings in-house. We're making housekeeping optional. We're installing more and more technology to help with the check-in process with beverage or food process with wayfinding. We’re moving to more grab-and-go options on the food and beverage side because it's much more efficient to offer grab-and-go as opposed to sit-down dining. We’ll continue to have that option, but just looking for more and more ways to do things efficiently and looking for efficiencies on the utility side with cogeneration and other opportunities. We're doing a lot of things to help offset that. We're in our budget process right now. We have not landed on what that margin is going to be. But between the increases in rate and a lot of the efficiencies we're achieving; we're hopeful that we can offset a lot of the labor increases.
Colin Reed, CEO
Yes. Smedes, it’s Colin. I’m going to give a shoutout to not our manager, Chris Nassetta, who made a comment. He was being interviewed. I don't know when it was, but it was reported here. I read it maybe on Sunday or Monday. He made a very important point, which is, this industry that we are very much part of, both our entertainment business as well as our hotel business, is unique in one respect: we can reprice our business basically every day. We're on the offense as it relates to rate. We've been on the offense as it relates to cost. That's why you saw margins the way they were in the third quarter. I'm not saying this is easy. But I feel like 2022 is going to be a good year for this company.
Mark Fioravanti, CFO
I think when you look at everything, we still believe that we have margin expansion after the pandemic just as we did before.
Colin Reed, CEO
Yes, because of all of the things we've done from an offensive perspective. Is that okay, Smedes?
Smedes Rose, Analyst
I wanted to ask just one more question about the trends you're noticing. Do you have any insight on whether you're attracting new customers who previously chose larger cities and are now selecting your destinations like Nashville, Dallas, or Orlando?
Patrick Chaffin, COO
Yes. Smedes, good question. We've actually hired additional sales resources who are specifically focused on the acquisition and stealing market share away from some of our competitors and we are having success with doing that. Initially, it came in the form of folks who couldn't meet maybe where they wanted to in the past. So we became a new option for them and we've been able to win over their business. We've specifically hired sales folks to help us do that and we're very encouraged by what we're seeing.
Colin Reed, CEO
And again, I don't want to keep touting the same point. This was a directive that we made to management months ago. I mean, literally, probably 12 months ago at the height of the pandemic. We want to go on the offense here. We do not want to be a victim. We want to go recruit the best salespeople that have been disenfranchised by our competitors. That's what we've done and we're probably doing more of that. It sets us up really well for next year.
Smedes Rose, Analyst
Thank you.
Colin Reed, CEO
Thank you.
Operator, Operator
We'll go next to Dori Kesten of Wells Fargo.
Dori Kesten, Analyst
Hey. Thanks. Good morning. You previously said that in order to spin out the entertainment business, you needed a base of about $75 million in EBITDA and the right management team in place and an improving operating environment. Is there any update that you can give us regarding your view on the timing of the spin?
Colin Reed, CEO
No. No simply because we've got just so much going on with this business right now. We've got a TV platform, media platform that is in its growth mode. We've got to bring in Block 21 fully and explain to our shareholders what this group of assets looks like. We're working on other growth initiatives at this stage. But I feel confident that over the course of the next few months, six months, nine months, we will be able to one-way shape or form demonstrate to our shareholder group the underlying value of this enterprise, whether it's standalone or whether it's still within the company remains to be seen, but this is a very valuable business and one of which we're very excited about.
Dori Kesten, Analyst
And how are you thinking about your holiday programming longer term? I mean would you expect to return to ICE!, or have you found that the programming of last year and this year may have a better return?
Colin Reed, CEO
No. We love it. The problem is with all of the travel restrictions from China to this country, we spent two to three months with applications into Beijing to try and get visas for these artisans from Harbin. Unfortunately, because of the travel restrictions, this was dragging on and we couldn't get it. So we had to make an orderable here. That's why we've gone with Elf, which we're very excited about. But I think, Patrick, we will bring ICE! back as soon as we can get those folks from China.
Patrick Chaffin, COO
Yeah. Dori, this is Patrick. We definitely even further believe in the power of ICE!. I would say, though, that what we learned over the past two years is how we can take some of the interactive programming that we've got in place now to further enhance ICE! and make it even more exciting and a little bit fresh as well as the fact that we've gotten better at the ancillary offerings around ICE!. Some of the other attractions. We're very excited as we look forward and get the Chinese artisans traveling again hopefully next year.
Dori Kesten, Analyst
That’s great.
Operator, Operator
We'll go next to Chris Woronka with Deutsche Bank.
Chris Woronka, Analyst
Good morning, everyone. Thank you for the data points. I have a question regarding the business cancellations. Do you have any insights on how much of that has been rebooked, whether it's your own business or a broader industry perspective? It appears there might be significant opportunities ahead, especially since you are already experiencing considerable rate growth for next year. It also seems there could be even more short-term rate growth opportunities due to a shortage of space as businesses grow more confident in their needs. Can you provide any quantification on that, or is that likely more of an opportunity for 2023?
Colin Reed, CEO
We find it challenging to quantify this, primarily because our competitors and analysts do not disclose much information about group cancellations and rebookings. We are unique in our level of transparency. Your point is very significant as the meetings industry has been severely impacted over the last 18 months. This is one reason we focused on recruiting salespeople; in the first week of COVID, we directed our team to handle rebookings rather than stressing over cancellation fees or force majeure. Of the nearly two million room nights we've rebooked, 65% have been canceled. We are currently addressing a large volume of room nights that have canceled but have not rebooked. Our competitors have faced similar challenges. We view this as a substantial opportunity, especially since city convention centers have closed their doors and pushed their customers away, stating they cannot host conventions. We've managed to attract some of that business to our hotels. There is a significant opportunity here. Historically, when issues arise in the group industry, as seen in 2009, organizations that treated customers well stood out from those that did not. We aim to draw in new customers and the top salespeople, which bodes well for 2022, 2023, and 2024. Would you like to add anything to that?
Patrick Chaffin, COO
I think you captured it. Excellent.
Chris Woronka, Analyst
Great. Thanks, Colin. And then a follow-up for you on when we think about kind of the out years, you obviously have the opportunity to expand the Rockies. How would you consider the cost of doing that versus a potential to buy an existing property or another market or possibly a joint venture in a new market for you? Just trying to get a sense as to how important building that historical rotation strategy is versus possibly getting a pretty attractive return on expanding Rockies?
Colin Reed, CEO
Yes. This is the interesting part of that job and I think it's going to be something that Mark and I and Patrick will spend a ton of our time weighing here over the next six months because we're in a very fortunate position that we have a lot of opportunity here to grow this company. We've got some really exciting return projects that we can do. We've proven the thesis of Soundwaves. When we built this, there was a lot of concern of whether we built it too big. Why did you put a water park in a big group, dominant group hotel like Opryland? When you look at the 240,000 tickets we've sold this year, I think it on room night. We’ve really proven this. It's operating at or above our internal rates of return. Balancing these types of projects with the unique opportunity of finding an asset in a market that would aid the rotational strategy is something that we're spending a lot of time on right now. I believe that in six, nine months, twelve months from now we'll demonstrate to our shareholders that we have got a tail of growth that is pretty compelling. I’m not going to tell you which one comes first, which one comes second. By the way, the same thing applies to our entertainment business, we've got some really good interesting opportunities in our entertainment business as well. This is going to be a fun period of time for us I think over the next 12 months, not as we start ourselves in the chest being the victim. It's how we transform this company for its next wave of wonderful growth.
Chris Woronka, Analyst
Okay. Very good. Appreciate all the thoughts, Colin.
Colin Reed, CEO
Thanks, Scott.
Patrick Scholes, Analyst
Hi, there. Good morning. A couple of questions here. It sounds like there's been a bit of geographic shift in taking some business from other markets. Any particular markets that you have been able to take share from? Certainly, markets like New York City, San Francisco, Chicago are really hurting right now, as far as group business. Any particular markets that stand out to you?
Colin Reed, CEO
I don't know how to answer that question, because it's not obvious from our information that you can conclude that. Our business has been pretty solid all the way across. Yes, we've recruited salespeople out of Las Vegas and Southern California, and we'll continue to focus on those markets. The amount of business that we have conducted in this third quarter has been pretty uniform across each of our businesses. We've seen a lot of customers that we've seen in prior years. Do you want to add any comments on that, Patrick?
Patrick Chaffin, COO
No, I agree. Geographically, I think it's pretty consistent. I think we've picked up some opportunities out of the tech area. We've picked up some opportunities out of the medical devices and services areas. But geographically, I think it's pretty consistent.
Patrick Scholes, Analyst
Okay. I have two more questions here. Outside of the purchase of Block 21, how should we think about CapEx spend for next year?
Colin Reed, CEO
At this stage the only capital that we have planned for next year would be the capital replacement reserve. We don't have any major projects that we've announced yet.
Mark Fioravanti, CFO
Yes. Beyond just FF&E and maintenance, we'll be finishing up the F&B repositioning at the national, where we will put some capital to work at Block 21.
Colin Reed, CEO
To be announced.
Mark Fioravanti, CFO
Correct. But in terms of the enhancements, we think about tour product, food and beverage, but that's not a significant amount of money. Depending on when we close Block 21, whether it's year-end or early the first quarter, that will be the biggest capital outline.
Patrick Scholes, Analyst
Okay. Thank you. Then my last question, and I won't use the term rattle, but I ran through quickly the number that you had mentioned, did you say for 4Q mid-teen monthly positive cash flow, was that correct? If so, is that comparable to what you had talked about most recently the positive $16 to $19? Is that kind of apples-to-apples on how to think about that?
Colin Reed, CEO
Yes. Here's the hard thing as we get into the fourth quarter. The fourth quarter shifts from group dominant to leisure dominant. Leisure we all know is booked short term. What we’ve seen so far into the fourth quarter for leisure has been exciting. The issue is does that continue. So, we've said mid-teens and we’re pretty comfortable with that. Then we move into 2022, where group takes over again.
Patrick Scholes, Analyst
Okay. Fair enough. Thank you for the clarification. I'm good. Thank you.
Colin Reed, CEO
Thank you.
Mark Fioravanti, CFO
Thanks.
Operator, Operator
I will turn the program back over to Colin for any closing or additional remarks.
Colin Reed, CEO
Emma, thank you. And folks on the call thank you very much indeed for taking the time this morning. We're very excited about where our company sits. We're very excited about the growth opportunities for 2022 those that we have already announced. Hopefully, we'll have some more interesting projects to share with you over the months ahead. If there are any more questions that you may have for clarification, please feel free to reach out to either Mark Fioravanti or Todd Siefert, our IR guy. Thank you again. Look forward to meeting face-to-face at some point. If we don't speak beforehand, have a great holiday season for both Thanksgiving and the Christmas program. Thanks very much.
Operator, Operator
This does conclude today's program. Thank you for your participation. You may disconnect at any time.